As we move into a new decade, certainty and trust still seem to be in short supply across the UK's political and economic environment. With Brexit looming and impacting business decisions for at least the next few years, as well as climate change emerging as the greatest challenge for us all, business’ role in our future security is as important as ever. The ability of customers, employees and communities – or in simple terms you and me – to assess the impact of a business on our daily lives is increasingly important. In fact, it’s just as important as the ability of investors to assess financial returns. This all adds up to a clear reporting trend in 2020 and beyond; a company’s licence to operate has become a societal investment case, not just a financial one.
In our 14th How does it stack up?, our annual review of FTSE 100 reporting, we’ve seen positive progress. The effect of the new strategic reporting guidance, the UK Corporate Governance Code, is clear, and the continued influence of the integrated reporting framework is leading to a significant step towards more holistic and transparent reporting.
Companies in our top 10 reflect this positive direction with a refreshing mix of traditionally good reporters and new entrants. All demonstrate a clear focus on discussing the wider value and impacts of their businesses and the environments in which they operate. Beyond our top 10, we have seen the average scoring across our criteria increase for the first time in three years.
So, (polite drum roll and applause) who sits in our top 10 for the 2019 sample – and why?
10: Severn Trent
Severn Trent (a new entrant in 2018 to our top 10) continues to provide a clear picture of the role its activities play in maintaining the precious commodity that is water and how it understands it social and environmental purpose. The report again demonstrates how this social purpose is central to its financial and operational success.
Joint 8: Phoenix and British Land
Phoenix Group is a new entrant to the FTSE 100 and has landed straight into our top 10. The report is a great example of how to present a business’ strategic progress, performance and direction. It is also a standout example of how to demonstrate how a company makes money, while understanding the importance of its key resources and relationships.
British Land (a repeating constituent in our top 10) is another example on how to properly report on strategic direction, but where this report really excels is its connection of risk to its operations and the identification of emerging, principal and long-term risk. The introduction of the Task Force on Climate-related Financial Disclosures (TCFD) section is especially insightful and a must-read for those looking to disclose more in this area.
A new entrant to our top 10, Antofagasta’s integrated reporting is excellent . The managing and nurturing of its key resources and relationships forms the backbone of the report, while the articles on how its operations and outputs are and will continue to influence society and markets is truly insightful.
Another repeat member in our top 10, Fresnillo has been leading the way in extractive industry reporting for some time. Although you could argue this report is a little dense to read, its commitment to providing a transparent and detailed view of performance, risk and governance is commendable and linkage throughout is exemplary.
5: United Utilities
In similar vein to its peer Severn Trent, United Utilities understands its performance is intrinsically linked to its role in society and the nurturing of its key stakeholders. Another very dense report which could do with losing some repetition, but the whole narrative feels connected and material with sustainability embedded throughout.
Mondi continues to be one of the most consistent reports in the FTSE 100. The business model clearly identifies its activities across the paper value chain, while sustainability is effectively demonstrated as a critical driver to its operations. The strategic narrative and governance sections are particular highlights.
3: Taylor Wimpey
Taylor Wimpey has been a good reporter for a few years now and fully deserves its place in our 2019 top 10. The report is a good example of how to write a report concisely while maintaining the necessary level of detail. For example, the strategy section provides a concise, engaging narrative with clear priorities and explicit linkage to KPIs. There is also an insightful view of how relationships are nurtured, and the governance section gives a clear view of the activities of the Board.
Another new entrant to the FTSE 100 which has immediately earned a top 10 spot, Workspace is a refreshingly different approach to reporting. Although some may see the visual approach to this report as ostentatious, the report makes great strides in differentiating the company from its peers and bringing its culture to life. Behind the visual element there is some really insightful content with marketplace commentary, strategy and governance standout highlights.
Landsec takes first place for the third consecutive year. Yet again, this report delivers across almost all elements of disclosure; from market context, managing its resources and relationships, risk, governance and remuneration. The governance and remuneration sections remain some of the best examples in the FTSE 100, while clear linkage between sections demonstrates connected writing. The strategic narrative has lost its way a little this year, but overall this is a report that is difficult to fault.
Congratulations to all of the people involved in creating these great reports, as well as those who didn’t quite make it into this year’s top 10. As mentioned in the FRC’s recent Annual Review of the UK Corporate Governance Code, there is still work to do to improve governance practices and reporting to demonstrate the positive impact of business on the economy and wider society. But we are pleased to see that many reporters are recognising the challenge and taking positive steps in the right direction.
Senior IE Consultant
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